Downtown SF project may buy its way out of below-market-rate housing mandate

On a bright morning last November, Mayor Ed Lee stood in an empty downtown lot –a shiny shovel in hand — for the groundbreaking of 181 Fremont St. Before a crowd, Lee touted the project as part of San Francisco’s solution to its affordability problem, as 11 of the building’s 74 condos would be below market rate. Not only was the project a “great answer to the housing challenge,” with its mixed-income residences, it was also an example of “the way San Francisco works.”

But at the time, moves were being made to kill that very idea.

Developer Jay Paul Co. had come to The City that October and asked if there was any way the company could get around the requirements to build below-market-rate units.

Citywide, residential developers must make 12 percent of units below market rate or pay an in-lieu fee. But in the Transbay Redevelopment Plan, which affects 181 Fremont, such requirements are even more lofty. That plan envisions a high-density neighborhood of offices and about 4,500 residences around the future Transbay Transit Center, with 1,200, or 35 percent, made permanently below market rate.

The Jay Paul request prompted The City’s Office of Community Investment and Infrastructure, which is in charge of the Transbay area’s development, to commission a market study, which calculated the market rate for those 11 units. That study was completed before the mayor spoke in November.

By December, Director Tiffany Bohee of the Office of Community Investment and Infrastructure sat down with the developer to negotiate a deal. Jay Paul, which did not return calls for comment, agreed to pay The City $1.26 million for each of the 11 below-market-rate units, $13.85 million in all… (more)